Getting a loan can be an important financial step in achieving your goals, whether it’s purchasing a home, starting a business, or consolidating debt. However, to qualify for a loan, you will need to provide specific financial documents that demonstrate your creditworthiness and ability to repay the loan. In this article, we’ll cover the six financial documents you need to get a loan.
Contents
- 1 Credit Report
- 2 Proof of Income
- 3 Employment Verification
- 4 Bank Statements
- 5 Debt-to-Income Ratio
- 6 Collateral
- 7 Documents Required for Commercial Vehicle Loan:
- 8 Post-sanction/Pre-disbursement documentation:
- 9 Documents Required for a Business Loan:
- 10 For Self-Employed Individuals:
- 11 Documents Required for Loan against Property:
- 12 Documents Required for a Personal Loan:
- 13 Some lenders may also require additional documents such as:
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Credit Report
Your credit report is a summary of your credit history, including your credit accounts, payment history, and credit inquiries. Lenders use this document to assess your creditworthiness and determine the interest rate and loan terms you’ll qualify for. You can obtain a free credit report annually from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion).
Proof of Income
Lenders will want to see proof of your income to ensure that you have the financial means to repay the loan. This may include pay stubs, tax returns, or bank statements. If you’re self-employed or have irregular income, you may need to provide additional documentation, such as profit and loss statements or a letter from your accountant.
Employment Verification
In addition to proof of income, lenders may require verification of your employment. This can include a letter from your employer stating your job title, salary, and length of employment. Self-employed individuals may need to provide business registration documents or other evidence of their business’s stability.
Bank Statements
Lenders may also want to see your bank statements to verify your income and assess your overall financial health. This can help them determine whether you have the funds to cover the loan payments and whether you have a history of responsible financial behavior.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) is a measure of your monthly debt payments compared to your monthly income. Lenders use this ratio to assess your ability to repay the loan. To calculate your DTI, add up all your monthly debt payments and divide them by your monthly income. Lenders typically prefer a DTI of 43% or lower.
Collateral
Depending on the type of loan you’re applying for, you may need to provide collateral, such as a car or home, to secure the loan. The lender will hold the collateral as security in case you’re unable to repay the loan. If you default on the loan, the lender may seize the collateral to recoup their losses.
Documents Required for Commercial Vehicle Loan:
A commercial vehicle loan is a type of loan used to finance the purchase of commercial vehicles. The documents required for a commercial vehicle loan may vary from lender to lender, but some common documents required are:
- Application form with photograph
- Identity proof (PAN card, Aadhaar card, voter ID, passport, driving license, etc.)
- Address proof (Aadhaar card, voter ID, passport, driving license, utility bills, etc.)
- Income proof (bank statements, salary slips, income tax returns, etc.)
- Business proof (business registration certificate, GST certificate, etc.)
- Vehicle-related documents (quotation, invoice, registration certificate, insurance policy, etc.)
- Guarantor’s documents (if required)
Post-sanction/Pre-disbursement documentation:
Once your commercial vehicle loan is sanctioned, you will be required to submit some additional documents before the loan amount is disbursed. These documents may include:
- Loan agreement
- Security or collateral documents
- Post-dated cheques or Electronic Clearance Service (ECS) mandate for loan repayment
- NOC from the vehicle financier (if you are taking a loan against an already financed vehicle)
- Hypothecation agreement (if the vehicle is hypothecated to the lender)
Documents Required for a Business Loan:
A business loan is a type of loan taken by businesses to finance their operations, expansion, or other business-related purposes. The documents required for a business loan may vary depending on the lender and the type of loan, but some common documents required are:
- Application form with photograph
- Identity proof (PAN card, Aadhaar card, voter ID, passport, driving license, etc.)
- Address proof (Aadhaar card, voter ID, passport, driving license, utility bills, etc.)
- Business proof (business registration certificate, GST certificate, etc.)
- Income proof (bank statements, balance sheet, profit and loss statement, income tax returns, etc.)
- Financial projections (if you are applying for a loan for a new business)
- Business plan (if you are applying for a loan for a new business or for expansion)
- Collateral documents (if the loan is secured)
- Guarantor’s documents (if required)
For Self-Employed Individuals:
Self-employed individuals may require some additional documents to apply for a business loan. These documents may include:
- Partnership deed (if you are applying for a loan as a partnership firm)
- Memorandum of Association (if you are applying for a loan as a private limited company)
- Articles of Association (if you are applying for a loan as a private limited company)
- Shop and Establishment Act certificate
- Professional degree certificate (if you are a professional such as a doctor or a lawyer)
Documents Required for Loan against Property:
A loan against property is a type of loan where you pledge your property as collateral to borrow money from a lender. The documents required for a loan against property may vary from lender to lender, but some common documents required are:
- Application form with photograph
- Identity proof (PAN card, Aadhaar card, voter ID, passport, driving license, etc.)
- Address proof (Aadhaar card, voter ID, passport, driving license, utility bills, etc.)
- Property-related documents (property title deed, sale deed, NOC from the society, latest property tax receipt, etc.)
- Income proof (bank statements, salary slips, income tax returns, etc.)
- Business proof (business registration certificate, GST certificate, etc.)
- Collateral documents (if the loan is secured)
- Guarantor’s documents (if required)
Documents Required for a Personal Loan:
A personal loan is an unsecured loan where you do not
need to pledge any collateral or security. The documents required for a personal loan may vary depending on the lender, but some common documents required are:
- Application form with photograph
- Identity proof (PAN card, Aadhaar card, voter ID, passport, driving license, etc.)
- Address proof (Aadhaar card, voter ID, passport, driving license, utility bills, etc.)
- Income proof (bank statements, salary slips, income tax returns, etc.)
- Employment proof (offer letter, appointment letter, etc.)
- Collateral documents (if the loan is secured)
- Guarantor’s documents (if required)
Some lenders may also require additional documents such as:
- Credit score and credit report
- Debt-to-income ratio (DTI) proof
- Insurance documents (if you are taking a loan for a specific purpose such as home renovation or medical treatment)
- Other financial documents (such as investments, savings, etc.)